Dell announced today that it intends to phase out its XPS line of gaming …

Share this story

Dell announced today that it intends to phase out its XPS desktop systems in order to prop up Alienware sales. Dell acquired the much-smaller boutique computer manufacturer in March, 2006, but initially believed that the its own XPS products would complement Alienware's custom-built systems rather than compete with them for sales. This assessment appears to have been incorrect; Dell now reports that XPS sales have eaten into Alienware sales to a certain degree.

Dell currently offers two desktop product lines. The lower tier (Inspiron), is meant for cost-conscious buyers, with entry prices as low as $379, while the upper tier (XPS), further bifurcates into XPS Performance/All-in-One and XPS Gaming PCs. Out of this group, only the XPS Gaming tier is being eliminated, and Dell apparently intends to continue using the XPS brand on mainstream desktops and higher-end laptops. As for the reason why Dell chose to eliminate its XPS gaming division, the numbers below paint a sobering picture.

Data source: NPD Group

PC gaming (and by extension, PC gaming hardware sales) may not be dead, but the PC gaming industry is clearly not what it used to be. In 1998, the PC gaming industry generated 1.8 billion in sales and accounted for 32.72 percent of total video game software sales. The video game software market grew by 72 percent between 1998 and 2007, while PC gaming sales have consistently decreased every single year in both relative and absolute terms. The picture isn't quite as bleak as the graph makes it seem, given that NPD's numbers don't track digital distribution or subscription-based revenue, but neither category could possibly account for the tremendous decline in PC game sales.

Even if Steam, and other services like it, accounted for a massive 50 percent of "hidden" PC game revenue, total PC game software sales would only have reached $1.37 billion in 2007, down 24.9 percent from 1998. There's absolutely no sign that download services actually account for anywhere near this kind of volume, and subscription MMO sales, while important towards total PC gaming revenue, only reflect the conditions of one segment of the gaming market. Furthermore, a significant chunk of the growth in subscription MMO sales over the past few years is going to be flowing into the pockets of one particular titan. World of Warcraft may be a license to print money, but that's no help to the developers of, say, Call of Duty 4, to say nothing of any other games.

Dell's decision to kill its XPS gaming platforms does nothing to undermine the validity of the assertion that PC gaming is, in fact, in quite a bit of trouble. At $910 million, PC gaming can hardly be considered dead, and we won't be trotting that particular dead horse out for a beating today, but the industry is rapidly transforming into an increasingly niche market with fewer and fewer exclusive titles.

In somewhat happier news, at least for AMD fans, Alienware has announced a new, entry-level gaming PC built around AMD's Phenom. The new Aurora-class system is built on the AMD 790FX platform and offers your choice of either Athlon (5200+ and 6400+) or Phenom X4 processors, up to and including the Phenom X4 9850 Black Edition. The new rig is available in blue, green, silver, or black, though the flesh-eating biomechanical accessory robot (pictured to the right) is only available in black. With a starting price of $999, and an $1824 "midrange" option when outfitted with the Phenom 9850 and a Radeon X2 3870, Alienware is obviously trying to court both AMD fans and potential buyers in search of a lower-cost, custom-built machine.

Update

In a post on the company's blog, Dell PR representative Anne B. Camden has stated that the Wall Street Journal apparently got the story wrong. She states: "We [Dell] are going to invest like crazy in product development, design and engineering to propel Alienware as the premier gaming brand in the future. We are integrating the best gaming product development, engineering and design teams in the industry—Alienware and XPS—and this all-star lineup will be supported by a worldwide sales and marketing organization."

According to her, Dell XPS systems will remain "an important part of our gaming product portfolio." It's strange that the WSJ would misconstrue this major of a point, but according to Dell, the company does not plan an "early" phase-out of XPS systems.

Dell has obviously invested a lot of money and marketing in the XPS brand, but as our analysis above shows, the copany's decision to keep XPS around means that two Dell brands will continue fighting over the same shrinking piece of pie.